Buying a car is one of the most significant purchases you will ever make in your life. If you have the money to buy your dream car, do so. However, if you don't have the money, but really need a car, you can apply for a car loan.
The following are tips that you can use to make smart car financing decisions.
1. Know Your Credit Score
Before you apply for a car loan, you need to know where you stand with the creditors. The best way to do this is to ask for a credit report from bureaus such as TransUnion or Equifax. If it is your first time applying for the report, you will get it for free from the bureau website. After you receive the report, check your credit score.
If your credit score is less than 660, don't rush to get your car loan because the interest rates will be too high. Hold off the purchase for at least 6 months to improve your credit score.
2. Compare Loan Offers
The next step is to compare loan offers from different creditors. A smart buyer doesn't settle for one option, they look for the best deals to save money from loan repayments. If you want to buy the car from a friend instead of a dealership, make sure that the lenders allow such transactions.
As you shop around for a loan, consider the different types of lenders. SCCU auto loans are a great option for someone looking to buy a car. You can get a quote from a big bank, credit union, and an online lender.
3. Get Preapproval for the Loan
You have to be sure that the lender is going to give you the amount that you ask for. To do so, you need to be preapproved. The bank will look at your credit score, personal details, financial situation, and any other data that may help them decide the appropriate rate and loan amount for you.
The advantage of being pre-approved is that the amount written on the form is the exact amount that you will receive when purchasing the car. Unlike prequalification where the rates are bound to change, pre-approved rates remain the same.
4. Create a Budget
A pre-approved offer shows the maximum amount that the lender can give you. You might be tempted to use the full loan amount to buy a new car. However, that would be unwise since you have to pay an additional 10% of the car's total value as taxes and documentation fees. To avoid such expenses, go for a used car.
5. Find your Car
Once you decide on a budget, begin your car search. If you are going for a used car to save money, go for reliable brands. You can check deals from various dealerships in your area. After choosing a dealership, book a test drive and visit their premises. Take the car for a drive and make sure that you are satisfied with it.
Ask the dealer any questions that you may have about the car. Next, it's time to write the dealership a check.
6. Repay the Loan On Time
After making the purchase, you have to make sure that you repay the lender on time. Never miss your monthly payments because it could pull the credit score downwards. Create a personal budget where you always repay the car loan as the first expense.
Use the above tips to finance your car the smart way. One thing that you should always remember as you finance the car is go for something that you can afford. Don't buy an expensive car if you are not going to make the repayments on time.